VOLUNTARY REMARKS Buy Now… or Wait?

Dealing with today’s housing dilemma…

By Norman Block (Upsilon—North Carlina ’69)

Many would-be homebuyers are looking at today’s higher home prices and higher interest rates and are saying things like: “I am going to wait for home prices to come down!” or “I am going to wait until interest rates get back down into the 3% range!” Unfortunately, in my opinion, those kinds of comments are misdirected and misinformed. The truth is that now is a good time to be buying a home! Let’s explore that.

Home Prices

Yes, home prices have really soared in the past two to three years … but is it realistic to think home prices are going to fall? Maybe (possibly) home prices could soften a little bit in the more rural areas of the country where demand for housing is weak, but in urban settings and most parts of the country there are many more people who want to buy homes than the available inventory can accommodate. In those areas prices are not coming down.

People are staying in their homes longer than ever before because it is so expensive to move. Aging Americans are choosing to “age in place” as opposed to moving into retirement communities. A survey by AARP showed that 76% of Americans older than 50 said they wanted to age in place and stay in their homes. That means their homes are not becoming available for other buyers. Millennials, Generation X, and even Generation Z all initially postponed family formation … and thus household formation, waiting until older ages to make those moves. Now those big cohorts of Americans are settling down and they are seeing the financial for less in the future. The price of raw materials is not likely to decrease; in fact, quite the opposite is expected. There is no indication at all that home prices in most markets will lose value or that prices will fall to any significant degree.

Mortgage Rates

advantages of homeownership. All signs point to demand for housing staying strong for the foreseeable future.

Developable land in growing areas is certainly not going to be any less expensive in coming years. Contractors working today are not going to work

Regarding home mortgage interest rates, it is true that rates today are hovering in the 6.25% to 6.75% range, and that is considerably higher that what we were spoiled with during the pandemic years. People today are looking (hoping) for the return of 3% mortgage rates. That is highly unlikely to happen at any point in the near term. During the pandemic years interest rates in general were held down artificially low by the Federal Reserve setting the rate it charges member banks at zero. That was artificial and is not likely to happen again in any projectable future that we can see. Nothing today points to the Fed behaving like that again anytime soon.

Actually 6–6.5% is a fairly normal home mortgage rate. According to Freddie

Mac PMMS (c) TheMortgageReports. com, “30-year mortgage rates in the United States averaged 7.74% from 1971 until 2023, reaching an all-time high of 18.63% in October 1981 and a record low of 2.65% in January 2021.” We just got spoiled in 2020 and 2021 by an artificial situation.

So, what does all this mean?

Take Advantage Of Current Market

If you or someone you know is holding back, waiting, hoping that prices are going to come down … they are sadly mistaken for most places in America. It just is not going to happen. It is certainly not going to happen in our immediate area! If someone is waiting for home mortgage rates to fall back to the artificially low levels of the pandemic, that isn’t going to happen either!

and when, mortgage rates drop. You should ask about free refinance offers!

So don’t sit on the sidelines bemoaning the current market!

There are tremendous advantages financially for home ownership. One of the biggest financial advantages is the wonderful tax savings available on the appreciation of one’s personal residence. A married couple today can see their primary residence appreciate up to $500,000 in value and pay no taxes ever on that gain.

In addition, for most taxpayers, mortgage interest is tax deductible making the effective interest rate actually incurred much lower than the face rate on the mortgage itself. And do not forget that as homeowners make monthly payments on their mortgages, they are typically paying down the loan balance some each month with the principal portion of the P&I payment. That is like a forced savings account … you will see those dollars again!

Wait, What About Rent?

Norman Block

By the time a homebuyer today waits… hoping for better mortgage rates… home prices will have increased more than the homebuyer can save by a small decrease in interest rates… and that is really all we can expect. Experts today feel that home mortgage rates will hover between 5.5% and 6.5% for a long time going forward.

The contrarian thing to do is to take advantage of the current market because there are fewer buyers out there looking to buy homes right now. If interest rates do fall some, competition will only increase, driving prices higher. Also, at present, many lenders are offering special programs that let a borrower refinance at little or no lender costs if,

Renting is just not a good option, if you can afford to buy. Paying rent is simply creating wealth for someone else … your landlord. Paying rent is putting out dollars every month that go away and build absolutely no equity or wealth for you. Yes, prices are higher. Yes, interest rates on mortgages are higher. But home ownership is still how the greatest wealth is created in America for most families.

“Real Estate has been the best performing investment in modern history… with a set of unfair advantages that are completely unheard of with other investments.” Motley Fool has been a Professor of Practice at UNC’s Kenan Flagler Business School where he taught MBAs and undergraduates for more than 20 years. Mr. Block is also an Adjunct Professor at Duke’s Fuqua Business School where he co-teaches MBAs and has done so for the past six years. In addition, Mr. Block is the founding partner of Block & Associates Realty with offices in The Triangle and The Sandhills areas of North Carolina.

I concur! Now is the time to act. Don’t be caught sitting on the fence… waiting and hoping. Homeownership is a critical part of our American Dream. Now is the time to act!